Pre-Opening Wheat Market Report for 2/22/2011

 
on February 22 2011 10:57 AM

March wheat was down 20 3/4 cents late in the overnight session and down near 34 cents from the overnight highs. Outside markets shifted from bullish to bearish. With the technical overbought condition of the market and uncertainty over trade in the North Africa/Middle East region, traders stepped to the sidelines and the market saw significant long liquidation selling emerge in the overnight session. March wheat is already down as much as $1.01 1/2 per bushel in just 9 trading sessions. Ideas that the Chinese drought areas have not increased over the weekend and hopes for better rains ahead may have added to the bearish tone. US winter wheat areas look to get some rain ahead, but little or no rain is in the forecast for the dry western areas of Kansas down to Texas. March wheat closed 28 1/2 cents lower on the session on Friday and down 44 3/4 cents on the week. A hint of some rains for China plus talk of the overbought technical condition of the market helped spark a long liquidation trend ahead of the long weekend. News from the Argentine Agriculture minister that the 2010/11 wheat production is expected to be 14.7 million tonnes versus the previous forecast from 14.0 million added to the pressure. China's tightening actions helped drive commodity markets lower. Private exporters reported to the USDA that 100,000 tonnes of US HRW wheat was sold to Turkey. The 30-day and 90-day forecast models from the National Weather Service show a warmer and drier than normal trend for the southern and western areas of the winter wheat belt. This is seen as a supportive force, but traders appear to be taking a wait and see attitude over spring dryness possibilities. The extended forecast models for China are hinting at the possibility of significant rains as early as this coming weekend. Traders will monitor this situation closely, as a return to normal weather could ease concerns for the world's largest wheat producer. Ukraine wheat experienced cold weather over the past weekend, but no damage is expected, and crops in the Black Sea region could emerge in good shape this spring. Continued unrest in the Middle East helped to provide some underlying support. Morocco has issued a tender to buy 280,000 tonnes of milling wheat and Iraq is tendering for 100,000 tonnes of wheat. The Commitments of Traders reports as of February 15th showed non-commercial traders were net long 33,387 contracts, a decrease of 10,045 contracts in just one week. This shows an aggressive long liquidation trend by speculators. Commodity index traders held a net long position of 205,274 contracts, down 2,932 contracts for the week.

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